This week, all eyes were on CPI, which came in slightly cooler than expected, thus increasing the odds of a September rate cut (now 89%) and causing a sharp rotation across the markets. Traders fled large-cap growth for the severely underperforming small-caps, causing the largest spread between IWM and QQQ performance since January 2021! In other news:
- BA pleads guilty to fraud
- INTU fires 10% of workforce
- MSFT leaves OpenAI board
- TSLA delays Robotaxi event
- Identify Leaders & Laggards with Relative Performance
The big question now is; Will this rotation stick and are small-caps about to outperform? Let’s dig into the charts and see if they can provide us with any clues.
Weekly Analysis
SPY (SPDR S&P 500)
The SPY ETF finds itself at a key inflection point to close this week, with the price just managing to poke its head through the 1.618 golden Fibonacci extension from the 2022 high to low. Despite an all-time high close at $559.90 (+0.97%), it is possible this index could face headwinds in the coming weeks if money continues to rotate to small caps.
QQQ (Invesco QQQ Trust)
The QQQ ETF was hit the hardest this week by the news of cooling inflation, closing at $494.84 (-0.27%) and putting in a concerning weekly red doji candle. To make matters worse, just above lies the all-important 1.618 golden Fibonacci extension from the 2022 bear market high to low.
IWM (iShares Russell 2000)
Rotation is the lifeblood of a bull market, and this index was the clear choice of many investors and traders, putting in its highest weekly close since March of 2022 at $213.11 (+6.11%). The symmetrical triangle breakout, in tandem with above-average volume and a pending bullish MACD cross, suggests this move could just be getting started.
Earnings
Notable Results
C (CitiGroup)
- EPS: $1.52 vs $1.39 est
- SALES: $20.14B vs $20.07B est
FAST (Fastenal)
- EPS: $0.51 vs $0.51 est
- SALES: $1.916B vs $1.915B est
BNY (BNY Mellon)
- EPS: $1.52 vs $1.42 est
- SALES: $4.60B vs $4.52B est
WFC (Wells Fargo)
- EPS: $1.33 vs $1.29 est
- SALES: $20.69B vs $20.28B est
JPM (JP Morgan)
- EPS: $4.40 vs $4.19 est
- SALES: $50.99B vs $49.98B est
MANU (Manchester United PLC)
- EPS: $(0.31) vs $(0.27) est
- SALES: $172.46M vs $162.92m est
DAL (Delta Airlines)
- EPS: $2.36 vs $2.37 est
- SALES: $16.6B vs $15.45B est
PEP (Pepsi)
- EPS: $2.28 vs $2.16 est
- SALES: $22.5B vs $22.6B est
What’s Happening Now
SPY (S&P 500)
US inflation data turned negative month over month for the first time since 2020, prompting a market shift. Investors started rotating cash from high-flying tech & semi-companies into the bottom 480 stocks in the S&P 500 in anticipation of a September rate cut as Powell attempts a soft landing.
AAPL (Apple)
Dating back during election years, August has been Apple‘s best-performing month since the early 1980s. With an impressive 82% win rate and an average gain of 8.97%, August’s average returns nearly double that of the best period.
XLRE (SPDR Real Estate)
Real estate surged by 4.4% this week, leading the market higher due to potential rate cuts making REIT yields more attractive. Utilities, a traditionally defensive sector, also performed strongly. In contrast, Communication Services fell by 1.7%, dragged down by META‘s poor weekly performance.
Believe it or not, this is just a fraction of what happened in the markets this week. For a full run down delivered straight to your inbox every weekend, sign up for The Official TrendSpider Newsletter.
